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UK Consumer Inflation Flat in July

LONDON – Britain's consumer price inflation remained unchanged and growth in producers' raw materials costs slowed sharply in July, new figures showed Tuesday, adding to signs that a squeeze on U.K. households evident since last year's Brexit vote might soon begin to ease.

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Annual price growth remained unchanged at 2.6% in July, the Office for National Statistics said, defying the predictions of analysts' polled by The Wall Street Journal, who expected price growth would pick up slightly, to 2.7%.

Spurred by the pound's sharp depreciation in the wake of last year's Brexit vote, consumer price inflation hit 2.9% in May, its highest since mid-2013.

As was the case the previous month, inflation in July was kept in check by falling fuel prices, which offset the rising costs of food, clothing and household goods, the ONS said. Oil prices have slumped this year, particularly in the second quarter, due to a persistent oversupply.

The core inflation rate--which excludes the most volatile products such as food, alcohol and gasoline--also remained unchanged at 2.4%, but down from May's 2.6%.

However, annual growth in producers' input prices slowed to 6.5% in July, from 10.0% the previous month, the largest monthly drop in over five years, suggesting the impact of sterling's post-Brexit vote depreciation is starting to dissipate.

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Annual input price inflation peaked at 19.9% in January, and has been slowing every month since then.

Easing inflation is good news for the mostly domestic-driven U.K. economy. Quarterly growth stood at 0.3% in the second quarter, the U.K.'s Office for National Statistics said Wednesday, a slight improvement on the 0.2% growth rate of the preceding quarter, but still less than half the pace of growth at the end of last year.

The second-quarter expansion was driven largely by an improvement in consumer-facing services, which rebounded on stronger retail sales, a tentative sign that British shoppers could be returning to stores after sharply paring down spending in the first quarter.

Write to Wiktor Szary at Wiktor.Szary@wsj.com and Jason Douglas at Jason.Douglas@wsj.com